Working time cuts agreed in exchange for job guarantees at Deutsche Telekom

In March 2004, the United Services Union (ver.di) and the German telecommunications company Deutsche Telekom AG concluded an 'employment pact'- a framework collective agreement reducing weekly working time in exchange for job guarantees by the company. Weekly working time will be cut from 38 to 34 hours with only partial wage compensation for employees. The company has agreed that employment will remain stable over 2004-5 and that there will be no redundancies for economic reasons before 31 December 2008.

On 15 March 2004, the telecommunications company Deutsche Telekom AG and the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) concluded a so-called 'employment pact' (Beschäftigungsbündnis). The main provisions of this complex framework collective agreement include a reduction in weekly working time from 38 to 34 hours with only partial wage compensation, in exchange for job guarantees by the company. The agreement affects some 120,000 employees of Deutsche Telekom, of whom some 50,000 still have the status of civil servants.

The negotiations took place against the background of continuous job cuts at Deutsche Telekom and the privatisation of the former public posts and telecommunications sector. In 2002, Deutsche Telekom created a 'temporary employment and qualification company' (Beschäftigungsgesellschaft) called Vivento, to which a number of Deutsche Telekom employees were transferred in order to avoid forced redundancies. At the end of 2003, there were already some 15,500 employees on the Vivento payroll but Deutsche Telekom announced further job cuts for 2004, involving about 10,000 employees. At the end of 2003, the company agreed to enter into negotiations with ver.di on an 'employment pact' and proposed a massive reduction of costs based on general reduction of working time without any wage compensation. Ver.di rejected the proposals but agreed to negotiations which finally resulted in a package of agreements on 15 March 2004. Talks between the bargaining parties continue on how to implement the agreements in detail, but the most important provisions are set out below.

Reduction of working time and pay

With effect from 1 March 2004, the weekly standard working time for blue- and white-collar workers at Deutsche Telekom has been reduced from 38 to 34 hours. The bargaining parties agreed to a transition period until 30 June 2004 to enable working time schedules to be adapted to this new standard weekly working time. Wherever possible, a four-day week will be introduced. In exceptional cases, working time can be further reduced to 32 hours a week. For the 50,000 civil servants within the company working time will be reduced accordingly with effect from 1 April 2004 (see below).

It is estimated that the reduction in working time will save 10,000 jobs at the company.

This reduction in working time includes only partial wage compensation. In general, workers will be paid for 35.5 hours a week instead of the former 38 hours - ie employees will receive less pay than before. In cases where working time is reduced to 33 hours a week wages will be based on a 35-hour week, and if a 32-hour week is introduced pay will be based on a 34.5-hour week.

Annual payments such as holiday pay and the so-called Christmas bonus will be distributed over the year and become part of monthly pay in order to minimise reductions in the monthly pay packet.

Employees who are transferred to the company's temporary agency, Vivento, will receive 85% of their regular annual pay (including all bonuses). However, Vivento employee who are hired out will maintain their pay. Vivento is obliged to offer all Vivento employees employment within three months - otherwise Vivento will have to pay 100% of the former wage.

With effect from 1 January 2005, wages at Deutsche Telekom will be increased by 2.7%. This pay agreement will be in effect until 31 March 2006.

Part of the agreement involves the creation of a 'hardship fund' to attenuate particular hardships resulting from the implementation of the accord. This fund will consist of EUR 18 million. The members of the executive board of Deutsche Telekom will make an additional contribution to this fund.

Job guarantees

Apart from those job cuts which had been decided in 2003, no further cuts in employment will take place in 2004. Furthermore, in 2005 no redundancies will be made. This also means that no further 'spin-off' organisations of Deutsche Telekom will be set up. In 2006, job cuts are excluded 'in principle'. If, however, the economic situation in 2006 is such that further employment cuts are deemed to be necessary by the company, negotiations have to take place before any formal decision is taken.

Dismissals for economic reasons remain excluded until 31 December 2008.

In the talks following the agreement, the bargaining parties agreed to a new improved offer of lump-sum payments to employees who voluntarily give up their job.

Application to civil servants

The bargaining parties agreed that civil servants within Deutsche Telekom will also be subject to the reduction in weekly working time although they are not directly covered by the collective agreement.

Subsequent to privatisation, 50,000 employees of Deutsche Telekom retained their former legal status as career public servants (Beamte). This status guarantees that they cannot be dismissed on economic grounds but also means that their pay and conditions are not subject to collective agreements but regulated by way of federal law or directive. In October 2003, the German parliament decided to reduce the Christmas bonus for civil servants and to abolish all holiday pay with effect from 1 January 2004. The law requires Deutsche Telekom automatically to apply such reductions in pay to those civil servants on its payroll. Civil servants at Deutsche Telekom who work 34 hours will therefore retain their monthly salary. Ver.di regards the reduction in working time as a kind of compensation for the civil servants' losses in annual income due to the legal reduction in their bonus payments. A federal directive allows the employer to adjust the working time of civil servants to the collectively agreed standard weekly working time.

Reactions

Both bargaining parties welcomed the outcome of the negotiations. A spokesperson for the company called the deal a good compromise which secured employment. The chief negotiator for Deutsche Telekom, Heinz Klinkhammer, was quoted in the press as saying that the company now had a reliable foundation from which employment and cost problems could be handled on a long-term basis..

The ver.di chief negotiator, Franz Treml, called the agreement a historic result because it would prove that reductions in working time directly create employment. He acknowledged that the agreement was a compromise and that the trade union had also made concessions, but said that he welcomed the outcome of the negotiations, in particular the fact that there would be no dismissals before the end of 2008.

Commentary

The Deutsche Telekom agreement has to be assessed against the background of company plans to shed some 40,000 jobs in the forthcoming years and to create more spin-off organisations - to which the current collective agreements would no longer apply. When the management proposed an 'employment pact' to the trade union, it made no secret of its primary aim to reduce costs considerably. This company aim was attained, as it will now be able to make savings estimated to be in the range of EUR 300 million - mainly resulting from the reductions in wages following the introduction of the 34-hour week. From the trade union point of view, the concessions were the price for safeguarding many thousands of jobs.

The job guarantees involved in the agreement are relatively firm and ver.di can claim success in having managed to include in the agreement the commitment that the reduced working time is to be transferred into employment - ie that several thousand employees will effectively keep their jobs following this deal.

It remains to be seen what the long-term effects of this agreement will be and whether another employment pact will follow after 2008. (Heiner Dribbusch, Institute for Economic and Social Research, WSI)